AIG Must Vet Finances Of Liddy Replacement, Says Rep. Cummings
By ARTHUR D. POSTAL
National Underwriter News
May 27, 2009
WASHINGTON -- A Congressman critical of American International Group operations is demanding that any candidates for the chairman and chief executive post openings at the firm make detailed financial disclosures.
Rep. Elijah Cummings D-Md., in a letter to the AIG board said he wanted them to obtain financial background material equal to that required for top government positions. The information would be public.
AIG has embarked on a search to replace Edward Liddy, who has said his posts of chairman and chief executive officer should be held by two persons and he will resign when the board finds his replacements.
Rep. Cummings said the replacements should disclose their stock holdings, employment history and other information.
The congressman's staff said he is seeking the information to avert a repeat of what he and others saw as a conflict of interest in Mr. Liddy's selection. Mr. Liddy served on the Goldman Sachs board, which received $12.9 billion from AIG after the insurer was rescued, including payments that settled credit default contracts with Goldman Sachs.
AIG initially resisted calls, through the Federal Reserve Board and Treasury, to disclose the names of those banks with whom credit default claims were settled. At the time, Goldman Sachs said the settlement benefited its clients, not itself.
In his letter, Rep. Cummings said he justifies establishing tough standards for an AIG top executive because the interests of the "ultimate shareholders of AIG" -- the U.S. taxpayers -- "should be paramount" in the selection of someone to head AIG.
The taxpayers have held a 79.9 percent interest in the firm since September 2008, when AIG prevailed on the government for an $85 billion bailout loan. The company later obtained more loan money and credit supports, and its debt to the government at one point exceeded $170 billion.
Mr. Liddy said on May 21 that he wants to step down as chairman and CEO as soon as a replacement can be selected. He accepted the post for $1 a year in mid-September at the request of then Treasury Secretary Henry Paulson, just days after AIG accepted the government financial support.
Besides providing financial disclosures equal to that required for a top-level government job, any candidate to replace Mr. Liddy at AIG should "demonstrate ability to lead organizations that provide both insurance products and the complex financial instruments so prominent in AIG's collapse," Rep. Cummings said.
AIG should also only consider candidates "of the highest integrity who are committed to maintaining an open and honest dialogue with the U.S. Congress," he said.
At the same time, a new leader should be provided with a "reasonable level of compensation," Rep. Cummings said.
Rep. Cummings has been a frequent critic of Mr. Liddy. In his letter, Rep. Cummings said that the criteria he is proposing "should be self-evident."
Despite that, he said, he wrote his letter because "we find ourselves in a position in which months of misstatements and deception have eroded the trust of Congress in AIG's leadership to the point that the most basic constructs of corporate responsibility must be restated."
AIG did not immediately respond to a request for comment.
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